What is duty drawback?
Drawback is the refund of duties, taxes and fees collected upon the importation of goods and refunded when the merchandise is exported or destroyed. Up to 99% of duties, taxes, and fees paid at import can be refunded upon evidence of export or destruction with a filed drawback claim.
Who can claim duty drawback?
Anyone directly involved in the lifecycle of a product can claim drawback. The Exporter of Record (EOR) is the default party with rights to claim drawback. In many cases, the Importer of Record (IOR) is the one filing the claim, with cooperation from their export partner. For goods that were destroyed and never exported, the Importer is the entity with primary drawback rights.
Brief History of Drawback
Early History
The first duty drawback law was established as part of the Tariff Act of 1789 - one of the earliest acts passed by the U.S. Congress. Its primary purpose was to stimulate international trade and manufacturing by offsetting tariff costs on goods that were later exported. This early form of drawback helped offset the costs associated with tariffs, making U.S. exports more competitive in global markets.
19th and 20th Century
The program evolved significantly throughout the 19th and early 20th centuries, with the Tariff Act of 1890 formally codifying manufacturing drawback for exported goods made from imported materials. Major modernizations came through the Customs Modernization Act of 1993 which introduced the concept of unused merchandise to replace "same condition merchandise". In 1993, the implementation of the Automated Broker Interface (ABI) further modernized the process by allowing electronic filing of drawback claims for the first time.
Modern Era - TFTEA
The Trade Facilitation and Trade Enforcement Act (TFTEA), enacted in 2015, represents the most comprehensive overhaul of the drawback program since its inception. Under TFTEA, the highly subjective "commercially interchangeable merchandise" qualifier was replaced with a standard definition using 8 digit HTSUS codes. TFTEA also extended the lookback period for imports from 3 years to 5 years. Since February 2019, all drawback claims must be filed electronically, making the process more efficient for U.S. businesses engaged in global trade.
How do I claim duty drawback?
Drawback is one of the most complex processes in global trade and comes with strict penalties for non compliance. Because of this, most claimants work with a customs broker to validate their processes and data meet the requirements.
While claimants still have the option to self-file, CBP stopped accepted paper claims in 2019 as part of the Trade Facilitation and Trade Enforcement Act (TFTEA) and self-filers must now use CBP-certified filing software to submit a claim via ABI.
Primary types of drawback
While there are many different types of drawback claims, these are some of the most common:
Manufacturing Drawback:
Merchandise used to manufacture an article which is destroyed or exported within 5 years of import
Unused Merchandise Drawback:
Unused merchandise exported or destroyed within 5 years of import
Rejected Merchandise Drawback:
Non-conforming, shipped without consent or defective merchandise returned for destruction or exportation within 5 years of import
Returned Retail Merchandise Drawback:
Sold at retail and returned to and accepted by retailer for any reason and exported or destroyed within 1 year of importation
Eligible and Ineligible Duties
Eligible for Drawback
- Customs Duties
- Section 301 Duties
- Merchandise Processing Fees
- Harbor Maintenance Fees
- Internal Revenue Tax
- Certain Agricultural Fees
- Marking Duties
Not Eligible for Drawback
- Antidumping Duties
- Countervailing Duties
- Section 232 Duties
- IEEPA Tariffs